How to Weed Out Bad Business Brokers

A business broker in the state of Tennessee is not required to have any kind of license or training. Anybody can print a business card and call themselves a business broker. Crazy? Yes, it’s crazy.

To appreciate just how crazy this is, realize that you can’t be a barber without special training and a license. You can’t operate a nail sale without a state license (which includes training). There’s a 12-week training program you can take if you want to groom a dog. But to call yourself a business broker in the state of Tennessee? …… no requirments, no training, no license, zip, nada nothing.

Maybe that’s why there are so many incompetent business brokers.

Most business brokers don’t know what they’re doing, but they don’t want you to know that. The most common way they’ll try to trick you is by adding meaningless letters after their name as though to suggest some special designation has made them qualified. These are the equivalent of mail order diplomas. They proliferate the world of business brokerage, yet they are worthless.

Of course, there are some designations that in fact suggest a bona fide level of business broker professionalism and training. Look for a JD, MBA, CPA or CFP, and you can be confident the business broker is a true professional. You might occasionally come across a business broker who has obtained one or more licenses from FINRA, a division of the Securities and Exchange Commission. Those credentials better prepare a business broker for “non-Main Street” deals that involve public markets and/or the exchange of securities. Example, investment bankers on Wall Street are required to have FINRA licensing.

I hope the state of Tennessee will one day require licensing and standards of professionalism on those who want to call themselves a business broker. It will eliminate the charlatans who try it out until they can find another job, those who can’t make it in real estate and think they’ll give business brokering a try, and those who are just plain incompetent who give all trained professionals a bad name. But more importantly, having high standards to be a business broker will be better for the business owner who needs the highest level of care and professionalism when it comes to selling their greatest asset, which usually happens to represent their retirement.

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Tennessee Valley Group

Jim is an attorney (non-resident status with the Missouri Bar) and though he no longer practices law, he has read and negotiated enough legal documents to fill a cargo tanker. He has an MBA from Harvard Business School and knows how Wall Street and private equity operates. Jim is a Tennessee Supreme Court Rule 31 listed general civil mediator with tons of experience helping business owners (large and small) work through sensitive problems to achieve winning results. He is the author of "Home Run, A Pro's Guide to Selling Your Business, Seven Principles to Make Your Company Irresistible."

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